Heinrich Carl von Schimmelmann

Heinrich Carl von Schimmelmann (13 July 1724 – 16 February 1782) was a German-born Danish nobleman, merchant and statesman.

Life

Early life and career

His father was a merchant in Demmin. Since education was scarce, it was von Schimmelmann's force of personality that brought him success, although his ways are still unclear. Von Schimmelmann started out as a merchant himself, learning the trade in Stettin. Soon thereafter he set up a supplies store in Dresden. On 4 March 1747, at the age of 23, he married then 17-year-old Caroline Tugendreich Friedeborn, furthering his career. By 1755, von Schimmelmann was responsible for tariff collection in Kursachsen. This enabled him to assume control of deliveries to the Prussian army during King Frederick the Great's Seven Years' War against Saxony.

Connection with Denmark

After having made his fortune in war, von Schimmelmann moved to Hamburg in 1759 and bought the Ahrensburg estate in Holstein. Here, the head of the Danish government, Count von Bernstorff, realized how von Schimmelmann's talents as a merchant could benefit the state of Denmark during those times of financial duress. Von Schimmelmann on his own part benefited from the connection with the Danish government both due to Denmark's neutrality being beneficial for trade, and for reasons of prestige. Negotiations soon led to Schimmelmann being appointed as second in command to the Danish attaché in Hamburg, and the connection with Denmark was solidified by buying property in Copenhagen and Jutland. He was also appointed Baron and received the Order of the Dannebrog.

The financial state in Denmark at the time was dire, due to the large army of 20-25.000 soldiers stationed in Holstein, the rearmament following the coronation of Peter III of Russia in 1762, and because it was hard for the state to get loans at the time. Denmark had tried to get funds through seignorage, but this destabilized both the state and the banks responsible. Lacking men of financial capacity, Schimmelmann's talents and reputation was utilized to get favorable loans from abroad to keep the Danish state and financial system afloat. In the years 1762-1765, Schimmelmann continued his work of securing the Danish government, sometimes even through loans of his own.

Influence on tax policies

To better the state's finances, Heinrich Carl von Schimmelmann decided on an extraordinary poll tax in September 1762. It would have been too difficult at the time to create a progressive income tax, but the brutality of the poll tax led to civil unrest. However, it secured the state finances and stabilized the financial markets.

An advisory board was created in December 1762 with von Schimmelmann as a member, through which he became de facto administrator of Denmark's taxes and deficit. With short interruptions, this influence over the state's finances continued until his death.

During the Amsterdam banking crisis of 1763 Schimmelmann visited Amsterdam. He left after a few days, but came back within a few weeks.

Private business

Besides his duties as overseer of Denmark's taxes, von Schimmelmann also ran his own private business, having bought the Danish sugar plantations in the Danish West Indies and a sugar refinery in Copenhagen for 400,000 rigsdaler. The plantations used slave labor from the Danish trading stations in present-day Ghana. Through the work of von Schimmelmann's son Ernst Heinrich von Schimmelmann among others, slave trade was banned in 1792 (effective from 1803). Schimmelmann also bought the Hammermøllen rifle factory north of Helsingør from the government for 70.000 Rigsdaler in 1768.

However, the goal of his public endeavors was mostly the development of foreign trade. When Schimmelmann sought after a trade surplus, he thought it was especially important for a country like Denmark, where fiat money was the only means of payment. Through trade, one could avoid a weakening (depreciation) of the currency compared to other countries. Besides, the development of trade would improve domestic wealth and thus also the tax revenue and state finances.

He became connected with this important endeavor when he on 7 March 1767 was made deputy of the College of Commerce, and later in December, when he was given a seat in the newly formed Trade Balance Commission, which was supposed to investigate the state’s finances and trade balance. Before Schimmelmann, other traders based in Copenhagen had realized that due to Denmark’s lack of naturally exportable goods, it was necessary to start intermediary trade with overseas goods as compensation. This, among other factors, led to the formation of the Danish East India Company. Schimmelmann wanted to further this by establishing a free port in Copenhagen, which probably would have been accomplished had it not been for the influence of Johann Friedrich Struensee.

Personal life

Schimmelmann had 9 children with his wife, 6 sons and 3 daughters. The oldest child was his son Ernst Heinrich von Schimmelmann, who followed in father's footsteps, becoming both Minister of Finance and Minister of Foreign Affairs.

Besides his extensive career, von Schimmelmann enjoyed an excellent social life. His wife understood how to host great parties in the couple’s winter home in Copenhagen, with royally approved masquerades. The summers were spent in the splendid castle Ahrensburg in Holstein. His circle of friends included the Danish statesmen with Bernstorff the Elder as the center, with whom he agreed on other political subjects. For example, Schimmelmann co-negotiated an agreement settling the Gottorp Question on 27 May 1768 between Hamburg on one side, and Denmark and Gottorp on the other, where the Holstein-Gottorp territories of Schleswig-Holstein were taken over by the King.

Relationship to Christian VII

Due to his many-faceted political influence, Schimmelmann came into close contact with the mentally-ill King Christian VII, with whom he also traveled abroad in 1768. His influence on the King was mostly due to the King’s respect for von Schimmelmann’s knowledge of trade and finance, and the King consulted with Schimmelmann on many occasions, e.g. regarding how much the country could spend on the army. Schimmelmann gained greater influence than Bernstorff ever could, and so it was von Schimmelmann, that convinced the King to banish the notorious prostitute Støvlet-Cathrine from Copenhagen in 1768.

Besides reflecting his personal abilities, Schimmelmann’s influence also shows the importance of money. In this context, it was unfortunate that he both served the role as financial advisor and made money by serving as a bank and lender for the state. The possible conflict of interests was often pointed out by his enemies, as he used his official position to earn money as a trader. Even though he in no way cheated the state, this still put him in a bad light

Age of Struensee

During von Schimmelmann’s rising influence, Struensee came to power in 1770. As the insane King’s physician, Struensee came to be de facto regent, and deposed many of the statesmen besides Schimmelmann, before finally being overthrown and executed in 1772. Schimmelmann, however, was still valuable to the new men in power, and so decided to work with the new leaders to salvage what he could of his old policies, as well as securing his own personal business endeavors. He succeeded beyond all expectations due to the goodwill of Struensee and his fellows, who made him a member of a commission established on 28 December 1770 with the purpose of settling the main economic questions of the day. His wife also made good use of the new political climate, becoming close friends with Struensee’s lover, Queen Caroline Matilda.

Von Schimmelmann’s favorable position with Struensee influenced his relationship with former statesmen like Bernstorff once they came back into power. Schimmelmann, however, had a personal dislike for Struensee, who on his part wanted to sever the ties with Schimmelmann once possible. In the spring of 1771, Schimmelmann began withdrawing from his financial ties with the state. In the same year, the Treasury and the College of Commerce were closed down as the state financial system was being restructured to accommodate those in power, so Schimmelmann’s influence was diminished. However, careful as he was, Schimmelmann never completely severed the ties with either Struensee or the old circle of power, and thus retained his place in the limelight.

Age of Guldberg

After Struensee's fall, the King’s half-brother Frederick was made Regent, with his mother, Queen Juliana Maria and minister Ove Høegh-Guldberg as de facto rulers. This power transition enabled Schimmelmann to wield influence once again. Formally, his power lay in his position as member of the Tax Board, and in a seat on an extraordinary financial committee created in October 1772. The Treasury was reinstaured on 3 July 1773, with Schimmelmann as its director. Schimmelmann was also awarded the Order of the Elephant in 1773, and made Count in 1779.

The records of the time reflect Schimmelmann’s wide-ranging influence. At the start, he made sure that A. P. Bernstorff (Bernstorff the Younger) was reinstated and made head of the German Chancellery, and that Adolph Sigfried von der Osten was removed from the State Council in the spring of 1773. Furthermore, he facilitated the King’s divorce from his unfaithful queen. Schimmelmann and Bernstorff the Younger were quite close, and Schimmelmann was often consulted in financial matters. One result of this was the nationalization of the Bank of Copenhagen in March 1773, which came under the Tax Board, and thus under Schimmelmann’s personal leadership until his death.

Meanwhile, Schimmelmann had great influence on the state’s finances even though he did not have a seat on the College of Finance, an influence admiringly reflected in Bernstorff the Younger’s letters about his absolute leadership over the state’s fixed expenses, and great influence on other colleges. Bernstorff writes: “Schimmelmann is the soul in everything that happens in the internal affairs of the State. Even when decisions are made without him, it is as if he hastened their execution”. Naturally, Schimmelmann could not have had such influence unopposed. It was only possible with the support from the de facto rulers, Queen Juliana Maria and Høegh-Guldberg. Once again, those in power had great appreciation for Schimmelmann’s financial abilities, and he knew how to stay on good terms with them.

Mercantilism

The effect of this cooperation shone through on the trade policy of the time. Thus, it was at this time that the protectionist system of mercantilism was carried through in the age of Guldberg, both with regards to industry and trade, even to the extent that the state became involved in shipbuilding, fishing and overseas trade. It was decided that the government should begin fishing to a great extent in the northern seas, capturing whales and seals. These activities were connected with the royal trade with then-colonies Greenland and Iceland, which required large-scale investments in shipbuilding. Although Guldberg showed great enthusiasm for these projects, it was Schimmelmann who was responsible for the government’s attitude towards them, due to Schimmelmann’s great influence over Guldberg and in every aspect of the state’s finances.

This was also the case for another important decision, which was thought to be very important for trade, namely the excavation of the so-called Eider Canal in Schleswig-Holstein, connecting the Baltic Sea and the North Sea using stretches of the Eider River, which was completed in 1784.

Death

By the end of the 1770s, Schimmelmann’s health started to decline. Although he still found comfort in his work, it hurt him to see that his high hopes for Denmark’s finances were disappointed as the country was hit by inflation, and when A. P. Bernstorff was fired in 1780. Heinrich Carl von Schimmelmann died - as the richest man in Denmark - in Copenhagen on 15 February 1782, at the age of 58. He is buried in Wandsbeck outside of Hamburg.

Legacy

Although always a merchant with an eye for his own advantage, Schimmelmann was dutiful in his work for his adopted country Denmark. From the first years after moving to Denmark, he gained great honors by saving the country from a dire financial situation, and later exhibiting extraordinary skills in many other areas. His legacy has been attacked – not without justification – because the state takeover of the Bank of Copenhagen in 1773 in the long run led to inflation due to the unhealthy temptation of printing money whenever the state needed it. The ways in which he allowed the state to intervene in the economic activities of the day had negative effects already in his lifetime.